Precautions and Overview towards Taxation on LTCG

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I am Rajthilak certified banking professional like to give a insight and suggestion towards Taxation on LTCG - Long Term Capital Gain and Equities.

As for as new budget is concerned and the implication of majority investors thoughts. I like to project some of the areas where investors would have to consider.

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From a personal savings and investment perspective, the restoration of long-term capital gains tax on equity income is a huge change.

From February 1 onwards, selling stocks or equity mutual funds that you have held for the long term will mean paying taxes on gains accrued since the market closing of January 31. If, in a year, you realise more than Rs 1 lakh of such gains, then 10.04% of that (including cess) has to be paid as tax.

So far, so good. You might resent this tax or you may console yourself that it's at least a lot less than the 30% income tax slab you are on. If that's what you think, you may be getting ahead of yourself.

This tax could cost you a lot more than 10%. Even though the government will get 10% of your returns, you could actually lose 30 or 40% or even more of your returns, depending on how you invest. That's bad news, but the good news lies in the phrase 'depending on how you invest.' You can limit these losses if you understand what's going on and make tactical changes to your investing approach. There are three ways of reducing this massive hidden impact of the capital gains tax.

The first is obvious: don't buy and sell frequently. Choose all-weather stocks that will stand the test of time so that your holding period is long. The enhancement in your eventual returns will be huge.

The second is to invest in mutual fundsinstead of buying and selling equity directly. A mutual fund investor can get the same returns but needs to buy and sell much less frequently. The trading is done inside the fund's portfolio by the fund manager. However, as long as the investor holds on to the fund, there is no taxable event.

The third method is marginally usefuland would take some understanding and work. Since Rs 1 lakh of gains every year are tax free, at the end of every year, you could sell investments that would generate that much returns and immediately buy them again. It would save Rs 10,000 a year, which would of course compound in the future.

Side effects
There are other side effects of this tax too. For example, most investors think that tax-saving (ELSS) fund investments are completely tax-free, including the returns thus generated. This may not be true anymore, subject to the `1 lakh limit.

Those fund investors who are entirely dependent on advice given by fund distributors inevitably have a high churn rate in their investments. In the new tax regime, this will be even more harmful to your eventual returns. All things considered, the introduction of even a 10% tax gives investors a lot to understand and adjust. We've been unused to this since 2005, but must re-adjust now.

#Invest wisely to protect your hard earned money#

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Customers Liability & Electronic Payments in Digital Era

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Electronic payment, a customer-centric step

The use of information technology by banks and their constituents has grown rapidly and is now an integral part of the operational strategies of banks. The 'Payment and Settlement System in India - Vision 2018' envisages building best of class payment and settlement systems for a 'less-cash' India through responsive regulation, robust infrastructure, effective supervision and customer centricity. 

Customer centricity broadly includes strengthening customer grievance redress mechanism, enhancing customer education and awareness, and protection of customer interest. Bank customers are now relying more on electronic transactions. The demonetisation of high value currency notes in November 2016 provided boost to migrate to digital mode. 

For example, the monthly debit and credit cards transaction at point of sale (POS) peaked at 311 million (Rs 522.2 billion) in December 2016 and in the month of June 2017, it was at 224.1 million (Rs 455.4 billion).

However, the electronic transactions are sensitive for security and open to fraud. There is no single solution/foolproof way to protect the data. Frauds happen through phishing, hacking, stealing of banking information or through cloning of credit and debit cards. 

The number, frequency and impact of cyber incidents/attacks have increased manifold. So have grievances against online frauds. As per the annual report of Banking Ombudsman 2016, the debit and credit card related complaints come to 21.2% (nearly 22,000) of the total yearly complaints.

With the thrust on financial inclusion and customer protection and considering the recent surge in customer grievances relating to unauthorised transactions resulting in debits to the accounts/cards, for determining the customer liability, RBI has issued final guidelines on July 6, 2017. This is based on the draft guidelines issued in August 2016.

The unauthorised electronic transactions include both remote/online transactions like net banking, mobile banking etc, and face to face transactions requiring payment instruments to be presented at the point of transactions like ATM, POS etc.

If the loss is due to negligence of a customer (sharing the payment credentials), the customer shall be liable for the entire loss occurred due to unauthorised transactions. However, the loss occurring after reporting shall be borne by the bank. When unauthorised transaction occurs on account of contributory fraud/negligence on the part of the bank, there will be no liability to the customers even if the customer fails to report. 

If the transactions are on account of third party breach (neither with the bank nor with the customers) and if the customer notifies the bank within three working days of receiving the communication, there will not be any liability on the customers. 

If information is provided within four to seven working days, maximum customer's liability will be limited to Rs 5,000 (Basic Savings Accounts), Rs 10,000 (Savings Accounts, accounts of small and medium enterprises, CA/OD/CC accounts with yearly average balance of Rs 25 lakh and credit cards with limit of Rs 5 lakh) and Rs 25,000 for other CA/OD/CC accounts besides credit card limit of over Rs 5 lakh. 

For reporting beyond seven working days, the customer liability shall be determined as per individual bank's board approved policy. Banks shall provide the policy details at the time of account opening, display the policy in public domain and also inform the existing customers.
On being notified by the customer, the bank shall provide value dated credit (in case of debit card/bank account, the customer does not suffer loss of interest, and in case of credit card, the customer does not bear any additional burden of interest). 

Customer liability

The burden of proving customer liability arising out of unauthorised electronic banking transactions is on the bank. Banks may also, at their discretion, decide to waive off any customer liability in case of unauthorised electronic banking transactions even in cases of customer negligence.

Banks are required to send alerts by SMS mandatorily and emails (if registered). Unauthorised electronic transactions are to be notified to the bank by customers without any loss of time. Banks are required to offer 24x7 access through multiple channels (via website, phone banking, SMS, e-mail, IVR, a dedicated toll-free helpline, reporting to home branch, etc) for reporting unauthorised transactions. 

Customers can instantly respond by "Reply" to the SMS and e-mail alerts. A direct link for lodging the complaints, with specific option to report unauthorised electronic transactions is to be provided by banks on home page of their website.

Customers have to invariably provide mobile numbers to avail of electronic transactions facility (other than ATM cash withdrawals). Thus, today, customers can further migrate to electronic transactions with confidence. However, they have to track the notification of unauthorised transactions received through SMS/email and inform the bank within three working days. 

Even when the unauthorised transaction happens on account of customer's negligence (sharing the payment credentials), the customer has to notify the bank and is not liable for the transactions after notification. Customers have to invariably register their mobile numbers to do online transactions - other than ATM cash withdrawals. 

(The writer Mr.K N V PRABHU, a retired banker, is with ICICI Manipal Academy, Bengaluru)

💓 Thanks and wishes to My Guru Mr.K N V PRABHU for all such dedication.

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Banker's Holiday Diary - 2017

Dear Bankers,

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I have just gathered some information that may useful for your holiday planning and according to the below information you enjoy your vacation.

JAN
- 26th - Republic day
- 27th - Skip Work / Loss of Pay
- 28th - 4th Saturday (Bk Leave)
- 29th - Sunday

FEB
- 11th - 2nd Saturday
- 12th - Sunday
&
- 25th - 4th Saturday
- 26th - Sunday

MARCH
- 11th - 2nd Saturday
- 12th - Sunday
&
- 25th - 4th Saturday
- 26th - Sunday
- 27th - Skip Work / Loss of Pay
- 28th - Skip Work / Loss of Pay
- 29th - Telugu New year

APRIL
- 08th - 2nd Saturday
- 09th - Sunday
#
- 14th - Good Friday/Tamil New year
- 15th - Skip Work / Loss of Pay
- 16th - Sunday
#
- 22nd - 4th Saturday
- 23rd - Sunday
&
- 30th - Sunday

MAY
- 1st - May Day(Monday)
#
- 13th - 2nd Saturday
- 14th - Sunday
&
- 27th - 4th Saturday
- 28th - Sunday

JUNE
- 10th - 2nd Saturday
- 11th - Sunday
&
- 24th - 4th Saturday
- 25th - Sunday
- 26th - Ramzan/ Idu'l Fitr

JULY
- 8th - 2nd Saturday
- 9th - Sunday
&
- 22nd - 4th Saturday
- 23rd - Sunday

AUGUST
- 12th - 2nd Saturday
- 13th - Sunday
- 14th - Kolkilastami/ Janmastami
- 15th - Independence day
&
- 25th - Ganesh Chaturthi
- 26th - 4th Saturday
- 27th - Sunday

SEPTEMBER
- 02nd - Bakrid
- 03rd - Sunday
#
- 09th - 2nd Saturday
- 10th - Sunday
#
- 23rd - 4th Saturday
- 24th - Sunday
&
- 29th - Mahanavami /Saraswathi Pooja
- 30th - Vijayadasami/Dussehra

OCTOBER
- 01st  - Muharam/ Shardiya Navaratri
- 02nd - Gandhi Jayanthi
#
- 14th - 2nd Saturday
- 15th - Sunday
- 16th - Skip Work/ L.O.P
- 17th - Skip Work/ L.O.P
- 18th - Diwali
&
- 28th - 4th Saturday
- 29th - Sunday

NOVEMBER
- 11th - 2nd Saturday
- 12th - Sunday
&
- 25th - 4th Saturday
- 26th - Sunday

DECEMBER
- 01st - Eid Miladun Nabi / State Inaguration Day
- 02nd - Skip Work/LOP
- 03rd - Sunday
#
- 09th - 2nd Saturday
- 10th - Sunday
&
- 23rd - 4th Saturday
- 24th - Sunday
- 25th - Christmas

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YOUR MOBILE IS YOUR BANK (USSD Helps You)

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In this demonetisation your way of approach in digital will make you to feel like Superstar. Here below one of the way where you can check your Account balance, Mini statements, Transfer funds through IMPS & can Create a MPIN.

Unstructured Supplementary Service Data (USSD)

While most of the cashless methods of financial transactions mandate use of a smartphone, the USSD method works on the voice network and can work on a feature phone without an internet connection as well. As far as the functionality to check a bank account balance is concerned, it is as simple as checking the phone’s prepaid balance.

The service, which works only if a mobile phone number is registered with one or multiple bank accounts, works upon dialing *99# from the phone keypad. The phone sends a USSD message asking for the first three letters of the bank or its short name, or the first four letters of the IFSC code. For example the account holder of State Bank of India should enter ‘sbi’, that of State Bank of Bikaner and Jaipur should enter ‘sbj’, ICICI Bank account holder should enter ‘ici’, and so on.

The phone then fires a message with options to check account balance or transfer money of the bank account that is selected. Checking balance is simple, but transferring money requires a UPI-like method, which needs the MMID.

Apart from English, the USSD banking service, also known as National Unified USSD Platform, is also available in 11 other languages. The short codes to access the languages are *99*22# for Hindi, *99*23# for Tamil, *99*24# for Telugu, *99*25# for Malayalam, *99*26# for Kannada, *99*27# for Gujarati, *99*28# for Marathi, *99*29# for Bengali, *99*30# for Punjabi, *99*31 for Assamese, and *99*32# for Odia.

Be a #digitalcashstar

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FAQ's for Public on Withdrawal of Legal Tender

FAQs on Withdrawal of Legal Tender Character of the existing Bank Notes in the denominations of ₹ 500/- and ₹ 1000/-

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1. Why is this scheme introduced?

The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. The fake notes are used for antinational and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw has been introduced.

2. What is this scheme?

The legal tender character of the existing bank notes in denominations of ₹500 and ₹1000 issued by the Reserve bank of India till November 8, 2016 (hereinafter referred to as Specified Bank Notes) stands withdrawn. In consequence thereof these Bank Notes cannot be used for transacting business and/or store of value for future usage. These Bank Notes can be exchanged for value at any of the 19 offices of the Reserve Bank of India or at any of the bank branches or at any Head Post Office or Sub-Post Office.

3. How much value will I get?

You will get value for the entire volume of notes tendered at the bank branches / RBI offices.

4. Can I get all in cash?

No. You will get upto ₹4000 per person in cash irrespective of the size of tender and anything over and above that will be receivable by way of credit to bank account.

5. Why I cannot get the entire amount in cash when I have surrendered everything in cash?

The Scheme does not provide for it, given its objectives.

6. ₹4000 cash is insufficient for my need. What to do?

You can use balances in bank accounts to pay for other requirements by cheque or through electronic means of payments such as Internet banking, mobile wallets, IMPS, credit/debit cards etc.

7. What if I don’t have any bank account?

You can always open a bank account by approaching a bank branch with necessary documents required for fulfilling the KYC requirements.

8. What if, if I have only JDY account?

A JDY account holder can avail the exchange facility subject to the caps and other laid down limits in accord with norms and procedures.

9. Where can I go to exchange the notes?

The exchange facility is available at all Issue Offices of RBI and branches of commercial banks/RRBS/UCBs/State Co-op banks or at any Head Post Office or Sub-Post Office.

10. Need I go to my bank branch only?

For exchange upto 4000 in cash you may go to any bank branch with valid identity proof.

For exchange over 4000, which will be accorded through credit to Bank account only, you may go to the branch where you have an account or to any other branch of the same bank.

In case you want to go to a branch of any other bank where you are not maintaining an account, you will have to furnish valid identity proof and bank account details required for electronic fund transfer to your account.

11. Can I go to any branch of my bank?

Yes you can go to any branch of your bank.

12. Can I go to any branch of any other bank?

Yes, you can go to any branch of any other bank. In that case you have to furnish valid identity proof for exchange in cash; both valid identity proof and bank account details will be required for electronic fund transfer in case the amount to be exchanged exceeds ₹4000.

13. I have no account but my relative / friend has an account, can I get my notes exchanged into that account?

Yes, you can do that if the account holder relative/friend etc. gives you permission in writing. While exchanging, you should provide to the bank, evidence of permission given by the account holder and your valid identity proof.

14. Should I go to bank personally or can I send the notes through my representative?

Personal visit to the branch is preferable. In case it is not possible for you to visit the branch you may send your representative with an express mandate i.e. a written authorisation. The representative should produce authority letter and his / her valid identity proof while tendering the notes.

15. Can I withdraw from ATM?

It may take a while for the banks to recalibrate their ATMs. Once the ATMs are functional, you can withdraw from ATMs upto a maximum of ₹2,000/- per card per day upto 18th November, 2016. The limit will be raised to ₹4000/- per day per card from 19th November 2016 onwards.

16. Can I withdraw cash against cheque?

Yes, you can withdraw cash against withdrawal slip or cheque subject to ceiling of ₹10,000/- in a day within an overall limit of ₹20,000/- in a week (including withdrawals from ATMs) upto 24th November 2016, after which these limits shall be reviewed.

17. Can I deposit Specified Bank Notes through ATMs, Cash Deposit Machine or cash Recycler?

Yes, Specified Bank Notes can be deposited in Cash Deposits machines / Cash Recyclers.

18. Can I make use of electronic (NEFT/RTGS /IMPS/ Internet Banking / Mobile banking etc.) mode?

You can use NEFT/RTGS/IMPS/Internet Banking/Mobile Banking or any other electronic/ non-cash mode of payment.

19. How much time do I have to exchange the notes?

The scheme closes on 30th December 2016. The Specified banknotes can be exchanged at branches of commercial banks, Regional Rural Banks, Urban Cooperative banks, State Cooperative Banks and RBI till 30th December 2016.

For those who are unable to exchange their Specified Bank Notes on or before December 30, 2016, an opportunity will be given to them to do so at specified offices of the RBI, along with necessary documentation as may be specified by the Reserve Bank of India.

20. I am right now not in India, what should I do?

If you have Specified banknotes in India, you may authorise in writing enabling another person in India to deposit the notes into your bank account. The person so authorised has to come to the bank branch with the Specified banknotes, the authority letter given by you and a valid identity proof (Valid Identity proof is any of the following: Aadhaar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff)

21. I am an NRI and hold NRO account, can the exchange value be deposited in my account?

Yes, you can deposit the Specified banknotes to your NRO account.

22. I am a foreign tourist, I have these notes. What should I do?

You can purchase foreign exchange equivalent to ₹5000 using these Specified Bank Notes at airport exchange counters within 72 hours after the notification, provided you present proof of purchasing the Specified Bank Notes.

23. I have emergency needs of cash (hospitalisation, travel, life saving medicines) then what I should do?

You can use the Specified Bank Notes for paying for your hospitalisation charges at government hospitals, for purchasing bus tickets at government bus stands for travel by state government or state PSU buses, train tickets at railway stations, and air tickets at airports, within 72 hours after the notification.

24. What is proof of identity?

Valid Identity proof is any of the following: Aadhaar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff.

25. Where can I get more information on this scheme?

Further information is available on our website (www.rbi.org.in) and the website of the Government of India (www.finmin.nic.in)

26. If I have a problem, whom should I approach?

You may approach the control room of RBI by email or on Telephone Nos 022 22602201/022 22602944

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'Your Money Will Remain Yours': PM Modi Explains End Of 500, 1000 Rupee Notes

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 Prime Minister Narendra Modi has launched a frontal attack to curb black money as the government has cancelled the five hundred and thousand rupee currency notes from midnight today. But, the move has courted some criticism with common man facing some short-term problems. 

In a speech to the nation Modi has laid down several steps to minimise such public difficulties: A synopsis 

1. Persons holding old notes of five hundred or one thousand rupees can deposit these notes in their bank or post office accounts from 10th November till close of banking hours on 30th December 2016 without any limit. 

2. Thus you will have 50 days to deposit your notes and there is no need for panic. 

3. Your money will remain yours. You need have no worry on this point. 

4. After depositing your money in your account, you can draw it when you need it. 

5. Keeping in mind the supply of new notes, in the first few days, there will be a limit of ten thousand rupees per day and twenty thousand rupees per week. This limit will be increased in the coming days. 

6. Apart from depositing your notes in your bank account, another facility will also be there. 

7. For your immediate needs, you can go to any bank, head post office or sub post office, show your identity proof like Aadhaar card, voter card, ration card, passport, PAN card or other approved proofs, and exchange your old five hundred or thousand rupee notes for new notes. 

8. From 10th November till 24th November the limit for such exchange will be four thousand rupees. From 25th November till 30th December, the limit will be increased. 

9. There may be some who, for some reason, are not able to deposit their old five hundred or thousand rupee notes by 30th December 2016. 

10. They can go to specified offices of theReserve Bank of India up to 31st March 2017 and deposit the notes after submitting a declaration form. 

11. On 9th November and in some places on 10th November also, ATMs will not work. In the first few days, there will be a limit of two thousand rupees per day per card. 

12. This will be raised to four thousand rupees later. 

13. Five hundred and thousand rupee notes will not be legal tender from midnight. However for humanitarian reasons, to reduce hardship to citizens, some special arrangements have been made for the first 72 hours, that is till midnight on 11th November. 

14. During this period, government hospitals will continue to accept five hundred and thousand rupee notes for payment. 

15. This is for the benefit of those families whose members may be unwell. 

16. Pharmacies in government hospitals will also accept these notes for buying medicines with doctors’ prescription. 

17. For 72 hours, till midnight on 11th November, railway ticket booking counters, ticket counters of government buses and airline ticket counters at airports will accept the old notes for purchase of tickets. This is for the benefit of those who may be travelling at this time. 

18. For 72 hours, five hundred and thousand rupee notes will be accepted also at 

• Petrol, diesel and CNG gas stations authorised by public sector oil companies 

• Consumer co-operative stores authorised by State or Central Government 

• Milk booths authorised by State governments 

• Crematoria and burial grounds. 

These outlets will have to keep proper records of stock and collections. 

19. Arrangements will be made at international airports for arriving and departing passengers who have five hundred or thousand rupee notes of not more than five thousand rupees, to exchange them for new notes or other legal tender. 

20. Foreign tourists will be able to exchange foreign currency or old notes of not more than Rs 5000 into legal tender. 

21. One more thing I would like to mention, I want to stress that in this entire exercise, there is no restriction of any kind on non-cash payments by cheques, demand drafts, debit or credit cards and electronic fund transfer.

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IBPS RRB Exam Pattern, Syllabus 2016 for OA

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IBPS RRB Exam Pattern, Syllabus 2016: The Institute of Banking Personnel (IBPS) organizes an exam every year for recruitment in Regional Rural Banks (RRB) in the country. If you are interested in applying for the post of Office Assistant in Regional Rural Banks, read IBPS RRB Exam Pattern and Syllabus for Office Assistant Post.

IBPS RRB Recruitment Examination takes place at various centres across the country for a number of posts like Office Assistants, Officer Scale I, II and III. But, this article is solely focused on IBPS RRB Exam Pattern and Syllabus for the post of Office Assistant.

 

IBPS RRB Exam Pattern 2016 | Office Assistant

Almost every aspirant who had applied for the post of the IBPS RRB Office Assistant might be confused about the exam pattern and the syllabus. So, in order to provide our readers more clarity about the same, we have come up with this article to answer all the queries regarding the ‘IBPS RRB Exam Pattern Syllabus for Office Assistant’.

It is very important for all the applicants to be completely aware of the pattern and syllabus before they begin with their preparation.

Read:

The IBPS RRB Selection Process for Office Assistant involves a two-level recruitment paper.A candidate has to clear both of these exams in order to get selected for the post of Office Assistant. The two levels are

IBPS RRB Preliminary ExaminationIBPS Mains Examination

Both of these recruitment examinations will be conducted in a Computer-Based Test (CBT) format and will be objective type.

IBPS RRB Prelims 2016: Office Assistant

As per IBPS RRB Exam Pattern, the Preliminary Examination for IBPS RRB Office Assistant contains 80 multiple choice questions that carry 80 marks in total.

Name of the Section  Number of Questions Maximum Marks Reasoning Ability 40 40 Numerical Ability 40 40 Total 80 80

The total time duration to solve these questions is45 minutes. The candidates need to obtain minimum cut-off marks in both the subjects to clear the preliminary exam.

Only if the candidate clears this exam, he/she will be allowed to appear for the mains examination.Negative marking is applicable in case of a wrong attempt.

IBPS RRB Mains 2016: Office Assistant

For IBPS RRB Mains Examination, a total of 200 questions will be asked from all the subjects. Number of questions from each subject is 40. The total time allotted to solve these 200 questions is 2 hours.

Name of the Section  Number of Questions Maximum Marks Reasoning Ability 40 50 Numerical Ability 40 50 General Awareness 40 40 English/ Hindi Language 40 40 Computer Knowledge 40 20 Total 200 200

A candidate will be negatively marked for a wrong answer. If the candidate clears this exam, he/she will be selected for the post of IBPS RRB Office Assistant.

Based on your performance in IBPS RRB Mains Examination, a final merit list will be prepared. The candidates will be allotted seats in various Regional Rural Bank based on the scores achieved in IBPS RRB Mains. We conclude IBPS RRB Exam Pattern for Office Assistant here.

 

IBPS RRB Office Assistant Syllabus 2016

The syllabus for the post of Office Assistant in IBPS RRB CWE Recruitment Examination for both Prelims and Mains have been mentioned below in a section-wise format.

IBPS RRB Reasoning Ability Syllabus for Office Assistant

Seating ArrangementLogical ReasoningTabulationPuzzlesCoding-DecodingInequalitiesBlood RelationsSyllogismInput-OutputAlphanumeric SeriesRanking/Direction/Alphabet TestData InsufficiencyAnalogyOdd FiguresDecision MakingInput outputAssertion and reasonFigure SeriesWord formationStatement and ConclusionsStatement and assumptionsStatement and argumentsStatement and action’s coursesPassage and Conclusions

IBPS RRB Quantitative Aptitude Syllabus for Office Assistant

Data InterpretationPermutations and CombinationsProbabilitySequence and SeriesSimplificationNumber SystemsRatio and ProportionPercentageAverageProfit and LossWork and TimeTime and DistanceMixtures and AllegationsSimple and Compound InterestSurds and IndicesSequence and SeriesPie ChartsBar GraphsLine GraphsMixed GraphsCase Study

IBPS RRB Numerical Ability Syllabus for Office Assistant

LCM and HCFFactoringMissing NumbersFractionsRatiosAgeAverageTime and WorkTime and DistanceVolumeSeries CompletionPercentageProfit and LossPrices and Expenditure ProblemsMensurationSimple and Compound Interest

IBPS RRB English Language Syllabus for Office Assistant

Cloze TestReading ComprehensionFill in the blanksParagraph Completion/ Sentence CorrectionPara-JumblesMiscellaneousSynonyms/ AntonymsMultiple MeaningError Spotting

IBPS RRB Hindi Language Syllabus for Office Assistant

VyakaranMistakesSamanarthak ShabdVipritarthak ShabdGadyansh (Paragraph)Fill in the blanks with suitable wordsVartaniVakyaAlankarMuhavreVocabulary

IBPS RRB General Awareness Syllabus for Office Assistant

Current Affairs (last 6 months)Banking Awareness – Indian Financial SystemHistory and Structure of Indian BankingIndian EconomyRegulatory bodies – RBI, SEBI, IRDA, PFRDA, FSDC, FMCHistory/Functions/Roles of RBIBudget BasicsCurrent Union BudgetInternational Organisations/ Financial InstitutionsIndian ConstitutionGovernment SchemesMonetary and Credit PoliciesConcepts like BASELMicro FinanceBase RateNegotiable InstrumentsCredit Rating AgenciesFinancial InclusionsTeaser RatesGAARPriority Sector LendingAbbreviationsImportant DatesCurrent Bank RatesUNOMarketingAwards & Honours Sports

IBPS RRB Computer Knowledge Syllabus for Office Assistant

The Internet (Concept, History, Working Environment, Application)History of ComputersHardwareDatabase Management SystemCommunication (Basic Introduction)Operating SystemSecurity ToolsVirusesHackersNumber SystemMS Windows and MS OfficeNetworking (LAN & WAN)Shortcut KeysComputer Abbreviations

We hope that this article was instrument in clearing all your doubts and queries regarding the IBPS RRB Exam Pattern and Syllabus. You must now focus on your preparation and work hard towards achieving your goal. We will keep you posted for more updates on IBPS RRB Exam 2016.

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What is MCLR? How it works?...

I like to give a wide overview about the new term MCLR (Marginal Cost of fund based Lending Rate) . Before that as a Banker (Wealth Manager) in a leading Private sector Bank I like to summarize India's upcoming financial market event's. As our interest rates are concerned, according to current economic scenario Indian financial market will have a cheap lending (Loan's) & borrowing (TD) rates in this FY 2016-2017. Existing borrowers (applicable only floating interest rate) also enjoy this interest rate reduction. RBI restructuring the repo, reverse repo & indirectly wants to pump the cash flow in to the market. Because One person spending is another persons income. Our trendy behavior in purchasing Asset classes like Home, Gold, Two wheeler, Four Wheeler, Home Appliances & Personal Electronic accessories(Mobiles) will boost the cash flow in to the economy.

As a Banker in a financial institution I would say this MCLR will be benefit for New Loan Borrower's (NLB) & Existing Borrower's who switching from fixed to floating (or) fixed to MCLR. But, Existing borrowers should wait for the new system of calculation to settle before deciding to switch loans.

MCLR is the new benchmark lending rate at which banks will now lend to new borrowers. Till 31 March 2016, banks used the base rate as the benchmark rate to lend.

MCLR is built on four components—marginal cost of funds, negative carry on account of cash reserve ratio (CRR), operating costs and tenor premium.

Marginal cost of funds is the marginal cost of borrowing and return on net worth for banks. The operating cost includes cost of providing the loan product including cost of raising funds. Tenor premium arises from loan commitments with longer tenors. According to brokerage and investment group CLSA, the source of funding for a bank is based on actual domestic funding mix. MCLR is closely linked to the actual deposit rates.

“If one-year term deposit is at 7.50%. Then one-year MCLR will be 7.50% plus CRR, operation cost and tenor premium,” said Ashutosh Khajuria, executive director, Federal Bank Ltd.

The Reserve Bank of India (RBI) has asked banks to set at least five MCLR rates—overnight, one month, three month, six month and one year. Besides these, banks are free to set rates for longer durations as well. The rates have to be reviewed on a monthly basis, but banks that don’t have the capacity to do monthly reviews on can do so quarterly till March 2017.

MCLR-linked loans will be reset for a maximum of one year. So, you will have a new interest rate on your home loan at a pre-decided time and for a maximum period of one year.

Banks are also allowed to determine a spread that is higher than MCLR. Depending on your credit profile, banks will decide this. “The spread will be decided based on credit risk and tenor. For credit risk, in case of an individual borrower, we will look at Cibil rating. Depending on the credit worthiness of the customer, we will set the spread above MCLR. Currently, the spread is in the range of 25-60 basis points (bps) for home loans,” K.V.S. Manian, president-corporate, institutional and investment banking, Kotak Mahindra Bank Ltd. One basis point is one-hundredth of a percentage point.

Not all loans will come under this rate. For instance, loans covered by government schemes where banks have to charge interest rates as per the scheme are exempted from being linked to MCLR as the benchmark for determining interest rate.

How does it work?

If you plan to take a floating rate home loan, your loan will now be linked to MCLR. Most banks have announced five to seven rates. For home loans, banks will either use the six-month MCLR or the one-year MCLR as the benchmark rate. Therefore, from now, all floating rate loan agreements will have a reset clause at a pre-specified interval. “Banks can decide on the tenor that they want to use to reset for longer-term loans such as home loans. We have decided to reset home loan interest rates at a six-month frequency. Hence, the six-month MCLR will be applicable for home loans,” said Manian. Kotak Mahindra Bank has announced 9.40% as its six-month MCLR and the home loan will be reset every six months in case of any changes in MCLR. If you have a home loan, the bank will reset the rate automatically at a pre-specified date.

However, banks such as SBI and ICICI Bank Ltd have set one-year MCLR as the benchmark for home loans. For instance, for salaried individuals, ICICI Bank has set a floating rate home loan at one-year MCLR of 9.20% with a spread of 25 bps for loans of up to Rs.5 crore. So, the interest rate will be 9.45%. The bank’s website stated that this will be valid till 30 April 2016. Though the MCLR is reviewed monthly, your home loan will be reset every year automatically, depending on the agreement with the bank. For instance, if you take a Rs.30-lakh loan on 1 April this year, one-year MCLR is at 9.20% and spread on it is 25 bps, your home loan will be 9.45%. You will pay instalments at this rate for the next one year. If on 1 April 2017, one-year MCLR gets revised to 9.15%, your home loan interest rate will get reset at 9.40% (MCLR of 9.15% plus spread of 25 bps). Accordingly, your instalment or loan tenor may change.

According to a report by Ambit Capital Pvt. Ltd, RBI gave banks the provision of a reset period to partly smoothen the impact of changing rates on banks’ margins (as deposits re-price with a lag, reset periods allow bank to adjust the timing of loan pricing). As the concept of reset period contravenes with the RBI’s objective of quick transmission of monetary policy, the RBI has capped reset period at one year.

Though retail loans are likely to be set at six months to one-year MCLR tenors, corporate loans may be set at shorter tenors. “Due to complexity in the retail product, a pre-specified reset has been decided. When it comes to corporate loans, there is a possibility to negotiate across the multiple sets of rates that are available,” said Manian.

Can an existing borrower who is on a base rate regime move to MCLR? According to RBI, existing loans and credit limits linked to base rate will continue till repayment or renewal, and banks will have to continue publishing base rates as well. Existing borrowers can move to MCLR-linked loans at mutually acceptable terms and these loans will not be treated as foreclosure of existing facility.

What you should know

The MCLR-linked home loan rate is currently marginally lower than a base rate-linked loan. For instance, SBI was offering home loans between 9.50% and 9.55% till 31 March. From 1 April, the rate is lower by 10 bps and ranges between 9.40% and 9.45%.

According to the Ambit report, new MCLRs are not so different from base rates: “...even if benchmark rates would have fallen, the effective loan pricing for borrowers might not have changed much. This is because banks could change spreads over benchmark rates,” the report noted.

Home loan rates will now depend on the bank’s choice of reset period—six-month or one-year MCLR rate and spread rather than one common base rate and spread. According to a Centrum Broking Ltd report, while MCLR is intended to ensure effective policy transmission, past studies, including references to global banks, suggest limited rate transmission to end-user. Hence, its effectiveness in the longer run will need to be assessed, the report noted.

Unified Payment Interface: Bank through your smartphone

Unified Payments Interface was launched by Reserve Bank Governor Raghuram Rajan on Monday, April 11, 2016 along with Nandan Nilekani, advisor to NPCI.

With the launch of Unified Payments Interface (UPI) by Reserve Bank of India Governor Raghuram Rajan on Monday, your smartphone will work as a payment bank.

What is Unified Payments interface
Unified Payments interface (UPI) is a channel that powers multiple bank accounts into a single mobile application (of any bank) of a participating bank, merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the Peer to Peer collect request which can be scheduled and paid as per requirement and convenience.

It also provides an option for scheduling push and pull transactions for various purposes like sharing bills among peers.

One can use UPI app instead of paying cash on delivery on receipt of product from online shopping websites and can perform expenses like paying utility bills, over the counter payments, barcode (scan and pay) based payments, donations, school fees and other such unique and innovative use cases.

The interface is the advanced version of NPCI’s Immediate Payment Service (IMPS) which is a 24*7*365 funds transfer service.

How it works
UPI will offer a facility to identify a bank customer with an email-like virtual address. It will allow a customer to have multiple virtual addresses for multiple accounts in various banks. In order to ensure privacy of customer’s data,
there is no account number mapper anywhere other than the customer’s own bank. This allows the customer to freely share the financial address with others. A customer can also decide to use the mobile number as the name instead of the short name for the virtual address like 1234567890@sbi.

UPIs unique features

– Single click 2-Factor authentication for subsequent transactions
-‘Virtual address’ as a payment identifier for sending to & Collecting money from
– Bill splitting among friends
– Best answer to Cash on Delivery hassle, running to nearest ATM or rendering exact amount
– Merchant Payment with Single App or In-App Payments
– Schedule, PUSH and PULL Payments for various purposes
– Utility Bill Payments, Over the Counter Payments, Barcode (Scan and Pay) based payments
– Donations, Collections, Disbursements Scalable

Benefits for banks:
– Single click 2-Factor authentication for subsequent transactions
– Universal APP for transaction
– Leveraging existing infrastructure
– Security (on other bank app it uses NPCI library to securely capture credentials)
– Payment basis Single/ Unique Identifier
– Enable seamless merchant transactions

Benefits for end customers:
– Round the clock availability
– Single APP for accessing different bank accounts
– Use of Virtual ID is more secure, no credential sharing
– Faster checkout
– No timeout scenario

Benefits for merchants:
– Seamless fund collection from customers – single identifiers
– No risk of storing customer’s virtual address like in Cards
– Suitable for e-Com & m-Com
– Resolves the COD collection problem
– Single click 2FA facility to the customer – seamless Pull
– In-App Payments (IAP)

Don't trash bad notes, exchange

Many a time you may come in possession of bad quality notes and sometimes these currency get torn into pieces of different size, rather unintentionally. 

Do you discard the bad notes and even throw away the cut notes or pieces ofthem? The Reserve Bank of India (RBI) desires the public to possess only good quality currency notes and channelise the bad quality notes back to the RBI through banks. 

As a layman you should be aware of your entitlements to exchange cut/ mutilated/ soiled notes and receive the value specified. A brief given below will help in understanding your rights to exchange bad/ poor quality notes through the banking system.

A currency note which has become dirty due to usage or a ‘two-piece note’ where two pieces of the same note are pasted together to form the entire note is a “soiled note”. A note of which, a portion is missing or which is composed of more than two pieces is classified as a “cut/ mutilated note.”

Any currency note cut into two pieces (irrespective of the location of the cut) and pasted together is a soiled note and you can receive full value for this from banks. However, the amount receivable on mutilated notes depends upon the denomination of the notes and the largest undivided portion available of it. 

For notes from denomination of Rs 1 to Rs 20, full value is receivable if the single largest undivided piece of the note presented is more than 50 per cent of the area, rounded off to the next complete square centimeter (measured in a standard grid) and if it is below or even up to 50 per cent, no value is receivable. 

For example, a Rs 20 denomination note has an area of 93 sq cm. If the area available in the undivided portion is a minimum of 47 sq cm, full value is receivable, but if area of the note is less than 47 sq cm, no value is receivable. 

For higher denominations (i.e. Rs 50 to Rs 1,000), if the undivided area is more than 65 per cent, you get a full value; 40 per cent to less than 65 per cent, half value; and less than 40 per cent, no value is receivable.

Except for the largest undivided piece of the note, presentation/ submission of the 
remaining pieces is not mandatory and even if the remaining pieces are pasted together, the value receivable does not change.

The facility of exchange of soiled or cut or mutilated notes is made available at all bank branches – including those of cooperative banks and regional rural banks (RRBs). All bank branches display a board that reads, “Soiled/ mutilated notes are accepted and exchanged here.” 

If a bank branch is not able to immediately adjudicate the cut/ mutilated notes, it an accept and send such notes to the linked currency chest and ensure that the tenderer receives the exchange value within a reasonable time, say a fortnight. 

This facility is to be provided to all members of public without discrimination on all working days. Today, banks are required to exchange the soiled/ mutilated notes as one of their regulatory requirements.

These exchanged notes will be remitted to RBI through the currency chests/ link branches and it will reimburse the amount to the respective banks.

What is it in for banks?

The RBI has built-up a reward and punishment system to ensure that banks provide the services to the general public. 
An incentive of Rs 2 per packet (100 pieces) for exchange of soiled notes up to Rs 50 and for adjudication of mutilated notes at Rs 2 per piece is provided by RBI to the banks.

Refusal by any bank branch to exchange soiled notes or refusal by any currency chest branch to adjudicate mutilated notes tendered by any member of public can attract a penalty of Rs 10,000. The penalty can be Rs 5 lakh in case there are more than five instances involving deficiency in service by the branch, and such penalty will be placed in public domain.

Next time you come across any bad, soiled or cut note, remember it is your entitlement to get the note exchanged through banking channel within the well-defined system put in place by the RBI.

BY K.N.V.PRABHU

(The writer is a retired bank executive. He is my Guru, currently a Faculty of Banking at ICICI Manipal Academy, Bengaluru)

Time to look up our unclaimed deposits

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Bank deposits are simple, secured, safe, liquid and convenient means of savings at a reasonable, but assured, return. For a common people, bank deposits forms a major part of their financial savings.

If a savings account is not operated i.e. there is no customer induced transaction for a period of 10 years or more; or the term deposit is not withdrawn i.e. not claimed for 10 years from the due date, these deposits are treated as unclaimed deposits. 

Deposits become “unclaimed” on account of a variety of reasons: legal heirs/nominees may not have knowledge of the deposits of deceased depositors; deposits may have been kept in names different from their usual style, may be using a short name/nick name; incomplete address provided; depositor might have forgotten the details, especially when he/she is under a transferrable job; maintaining secrecy of bank accounts and not sharing information with family members; banking with multiple banks etc.

Earlier, banks would enjoy the funds available under unclaimed deposits. In 2014, however, for effective usage of the amount, the RBI directed banks to transfer the outstanding amount under unclaimed deposits to the Depositors Education and Awareness Fund (DEAF) under the RBI. The fund shall be utilised for the promotion of depositors’ interests and for such other purposes which may be necessary as specified by RBI from time to time. 

In January 2015, RBI also released guidelines on criteria for seeking financial assistance from the DEAF to be granted to institutions/ organisations/ associations for taking up various activities relating to promotion of bank depositors’ education and awareness.

Banks are now required to transfer these unclaimed deposits with up to date interest on monthly basis to the DEAF. The type of deposits includes savings accounts, fixed/ term deposits, cumulative/ recurring deposit, current accounts, other deposit accounts in any form or with any name, cash credit accounts (with credit balance), loan accounts after due appropriation, margin money against issue of Letter of Credit/Guarantee etc, or any security deposit, outstanding telegraphic transfers, mail transfers, demand drafts, pay orders, bankers cheques, sundry deposit accounts, inter-bank clearing adjustments, unadjusted NEFT credit balances and other such transitory accounts, unreconciled credit balances on account of ATM transactions etc.

Upon receipt of demand from the customer/depositor, banks are required to repay along with interest, if applicable, the unclaimed deposit transferred to the DEAF while lodging a claim for refund from the fund. The interest payable from the fund, if any, shall accrue only from the date on which the balance in an account was transferred to the DEAF to the date of payment to the customer. 

In the case of a claim for refund of foreign currency denominated deposit accounts, the banks shall be entitled to claim refund of the eligible amount in INR only. The in-operative account can be converted to operative at the option of the depositors. 

Legitimate dues
The RBI Annual Report – June 30, 2015, indicates outstanding in DEAFund at Rs 7,875 crores as compared with Rs 2,795 (June 30, 2014). This amount with the fund is the legitimate dues from the banking sector to the depositors. 

Banks have been attempting to refund unclaimed deposits by sending letters to the last available address of the depositors. During the earlier days of banking, there were no strict Know Your Customer (KYC) norms in place and accounts were opened only with introduction, sometimes even without photographs. Hence, banks are not in a position to locate all the beneficiaries and refund the amount. The action, therefore, to get the amount back from banks should be initiated by the beneficiary-customers.

Banks have taken pro-active steps to find whereabouts of the account holders of unclaimed deposits/in-operative accounts and also display the list of these accounts on their websites. The list contains only the names of account holder(s) and their addresses. If such accounts are of non-individuals, the names of the authorised persons are mentioned too. The account number, its type and the name of the branch are not disclosed. The “find”option is provided to enable the public to search. 

The claim process, activating the inoperative account, forms and documents required for claiming are also provided. If anyone is aware of the bank wh-ere the unclaimed deposits are kept or if someone has a memory of his parents/ grant parents/ other relatives having kept their accounts with any bank, they can visit the bank’s website and initiate the action for refund.

The real issue, though, is how a depositor or nominee/legal heirs can identify their “deposits” under unclaimed deposits. Is it feasible to visit the websites of all the banks? Perhaps, the solution lies in providing the entire data of unclaimed deposits in a single website with proper “find/search” option so that the real beneficiary can have a simple means to identify the legitimate account and proceed to claim the amount with the respective banks. 

The initiative towards this end can be from the Depositors Education and Awareness Fund (RBI) itself or Indian Bank Association (IBA). This will help the beneficiaries to claim refunds to some extent.

BY KNV Prabhu
(The writer teaches banking at ICICI Manipal Academy (IMA), Bengaluru)

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Overview of Bank Rules on Fixed Deposit (FD)

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Proper understanding of the regulations/ practices prevailing amongst the banks on key issues helps in effectively managing fixed deposits (FDs) with banks. The interest rates on FDs vary from banks to banks. Uniform rates for different period are offered for deposits up to Rs 1 crore. Differential rates on bulk deposits (Rs 1 crore and above) are offered.  

Subsequent interest rate changes shall not affect the deposits already opened.  For resident Indian senior citizens of 60 years and above (in case of joint accounts, senior citizen being the first holder) but not for NRIs, additional rate (0.25 to 0.75 per cent) is offered. Some banks also fix maximum limits for offering this incentive rate. The common method of calculating interest (PNR/100: P=principal, N=number of years and R=rate) is applicable only for completed quarters. 

When the period is in less than a quarter or where the terminal quarter is incomplete, interest is paid proportionately for the actual number of days reckoning the year at 365/366 days. 

To ensure liquidity, always prefer Unit/Flexi FDs (both on simple and compound interest) to prematurely close required amount and continuation of the remaining amount as per the original terms. For premature closure, the rate applicable for the period completed (prevailing as on the date of deposit) with penalty, if specified at the time of deposit, is paid. 

No interest is paid, if closure is before completion of the minimum period of seven days. Alternatively, loan can be availed (75 to 90 per cent of deposit + interest accrued) at an additional rate specified by banks on the deposit rate. Avail loan against the deposits having lowest interest rate. Prefer Over Draft (OD, running account) to Fixed Loan as surplus funds can be parked and required amount can be withdrawn (within the loan limits) and save cost since interest is computed on the day-end balances. 

While a fixed loan is to be closed on or before the due date, FD with OD can be renewed and OD can continue. Perhaps, keeping maximum amount in FDs, availing OD against FDs and prudently operating/managing the OD in lieu of a savings account can maximise net returns. 

Out of the two options (loan and premature closure), which option is better to meet the liquidity?  The guiding factors for availing loan can be based on (1) duration of the deposits (on long duration deposits, the period completed is more than the residual period); and (2) temporary liquidity mismatch/the loan can be closed in near future.  Compare the loss on account of additional interest on loan with the loss on premature closure and decide. 

When aggregate interest received is Rs 10,000 and above in a financial year from a bank – not from a branch, tax is deducted at source (TDS) on the entire interest amount at the time of payment of interest/ financial year ends, whichever is earlier. 

To avoid TDS, non-IT assesses can submit Form 15G (F 15H for senior citizens) with PAN copy at the commencement of every financial year/ opening of new deposits. In joint accounts, TDS is in the hands of first holder. For receiving the full maturity value of compound interest FD, instruct the bank to deduct the TDS amount from SB account. 

Renewal of FDs
Auto-renewal facility provided is for renewal of FDs on due dates for identical period/ scheme. If any change is required, decide on the period/ scheme depending upon the interest rates on the due dates/ specific requirement and inform the bank before due date. Nomination gets renewed along with the renewal. The period within which the overdue deposit can be renewed retrospectively from the due date differ from bank to bank. 

The SB interest is paid from the due date till date of withdrawal of overdue deposits. Institutions/corporates not eligible to open SB accounts can open FDs for ultra-short duration, allows the FD to continue as overdue and withdraw the amount any time with SB interest. Banks pay a little more interest on non-withdraw able deposits (regulatory minimum Rs 15 lakh) and the right of premature closure is not available on these deposits.

You can also add or delete (in case of joint accounts) name/s by keeping the amount/duration of the original deposit uncha-nged. Banks display the list of unclaimed deposits (not claimed for a period of 10 years from the due date/ last operations) on their websites containing the names and address/the names of individuals authorised to operate the accounts with “find” option to search, along with the process to claim the amount. 

The unclaimed deposits are transferred to RBI - Depositors Education and Awareness Fund (DEAF) – and as per the RBI’s June 15 annual report of RBI June 15, Rs 7,875 crores is outstanding. One can attempt to locate these deposits and initiate steps to claim.

Even though bank deposits are considered to be simple, secured, safe, liquid and convenient way of savings at a reasonable but assured return, customers must be aware of the basic rules/practices with regard their fixed deposits and thereby maximise the returns and liquidity.

BY K N V PRABHU
(The writer is a Banking Faculty in ICICI Manipal Academy, Bengaluru)

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Monetising gold and investment options

For an average Indian, gold is much more than an avenue for investment. Generally, Indians do not part with family gold/ ornaments as gold has lot of sentimental value. Indian households own around 22,000 tonnes of gold. India imports around 1,000 tonnes a year and more than half of the gold imported is used for wedding/ornaments. Yearly, around 600 tonnes are used in jewellery production.

Some Indians consider gold as a financial asset and keep a part of their savings as investment in gold. Through the Union Budget, the Government of India has taken steps for gold monetisation with objectives of mobilising gold held by households/ institutions, reducing reliance on imports and provide fillip to gems/ jewellery sector by making gold available as raw material on loan from banks.

Several attempts were made earlier also to monetise the idle gold. Individuals have different avenues to invest in gold. Some invests in physical gold - coins/ biscuits - for converting into ornaments in future or to sell when price goes up.

Today, gold prices in India depend upon international prices, exchange rate of rupee and import duties levied by the government.

To avoid the risk of holding physical gold, a few invest in gold ETF (exchange-traded products) and the "gold" in held in demat form. The ETF value moves with gold price. On account of fall in prices, the amount in gold ETF has come down to Rs 6,323 crore (August, 2015).

Even with a lot of conveniences imbedded with gold ETF, many still prefer physical holding for sentimental value. Gold ETF also attracts tax as made applicable to debt schemes of mutual funds.

The Gold Deposit Scheme (GDS) was launched by banks around 15 years back. The GDS did not pick up. The minimum quantity of gold is high and the return is low. In the SBI (website), the minimum quantity is 500 grams; interest is at 0.75 per cent (for 3 years) and 1 per cent for 4 and 5 years. GDS certificates issued in terms of pure gold contents are transferable.

Option is given to redeem either in gold or equivalent rupee. Loans are provided at 75 per cent of the notional value. The GDS provides exemption from income tax and capital gains tax. While GDS is fine with temples/institutions, individuals do not prefer GDS since conversion of ornaments to pure gold for investing in GDS will result in heavy loss (5 to 15 per cent - making charges/ wastage etc). On maturity, if the investor wants to re-convert the gold into ornaments, again he has to spend.

The price risk for the gold deposited is for the banks. Banks can lend gold and generate income. On account of complexities involved, banks do not generally encourage small value gold deposits.

It is reported that the total quantum of gold mobilised by banks under the GDS come
to around 15 tonnes only. Drastic changes are proposed in the GDS. Preliminary purity test is to be done by any of the BIS-certified 350 Hall Marking centres to inform the customers.

Capital gains tax
They would be informed about the approximate amount of pure gold, melting the gold to arrive at the pure gold (fire assay test) and option to be given to the customer at this stage to accept the gold or to deposit, reduction of minimum quantity to 30 grams, payment of interest by banks in terms of gold, option to get back gold or the equivalent rupee, minimum period of one year with roll out option, exemption from capital gains and income tax etc. Banks may be permitted to deposit the gold as a part of CRR/ SLR requirements with the RBI, lend the gold to jewellers etc.

Investor's preference of the new GDS may depend upon the interest rates. The critical issue is the price risk of the gold with the banks and return banks can expect from the gold they mobilise.

The Sovereign Gold Bonds to be issued by the RBI to resident Indian entities in the denominations of 2, 5, 10 grams (with a cap of 500 grams per person per year) may fetch interest rate linked to international rate for gold borrowing - around 2 or 3 per cent - in gold terms.

Liquidity is ensured to the investors as gold loans can be taken on these bonds, can be sold or traded on commodity exchanges. On completion of the tenure (five to seven years), the investor can receive the equivalent of the face value of gold in rupee terms. Banks/ NBFCs/ post offices may collect money or redeem bonds on behalf of government.
The price risk (price of gold in dollar or rupee exchange risk) is not for the investor and may be for RBI/government. One has to wait for the final guidelines for taxation of interest earned and for capital gains tax, which may be as for applicable for physical gold.
Around 300 tonnes of physical bars and coins are purchased yearly by Indians for investment purpose and a part may get diverted in these bonds. Those who intend to invest in gold, sovereign gold bond will provide better opportunity. 

BY K N V PRABHU
(The writer teaches banking at ICICI Manipal Academy (IMA), Bengaluru)

Term Life insurance policies provide worldwide coverage

In Life insurance whether Term insurance has worldwide coverage, This is all our discussion describes below:

However, while underwriting, insurers make an assessment of risk. Generally, if you have travelled to certain high-risk zones, they will reject your application.

My view is that you should give the information asked for and no more. If you have not travelled to a high-risk country before, find an insurer that does not ask for future travel plans in the application form. Once the insurance is issued, it has worldwide cover.

Does a term plan have worldwide coverage?

—R. Kurien

Term insurance has worldwide coverage. However, while underwriting, insurers make an assessment of risk. Generally, if you have travelled to certain high-risk zones, they will reject your application. My view is that you should give the information asked for and no more. If you have not travelled to a high-risk country before, find an insurer that does not ask for future travel plans in the application form. Once the insurance is issued, it has worldwide cover.

I want to extend my life insurance cover to include my daughter. Would it be better to get another plan instead?

—Sangeeta Singh

Yes, buy a separate plan for your daughter. Only a few insurance companies offer a dual life insurance plan. Such plans are mostly limited to you and your spouse.

However, if your intention is that your daughter should be the beneficiary if you die, then add her as a nominee in the insurance.

What are the important details required to be submitted if I wish to change or add another nominee?

—Arvind Patel

When you want to change or add a nominee, you need to provide the following details to the insurance company: name, share in insurance benefit, relationship, age and address of the nominee. Insurers may also ask for proof to support all the facts stated above, and require a nomination form to be filled up. If the nominee is a minor, the insurer would require you to declare the name of an appointee for the minor.

I have lost my policy docket. What should I do?

—Sushma Singh

If you have lost or misplaced your policy, apply for a duplicate policy. The rights and privileges of a duplicate policy are the same as that of the original. The process to obtain this may vary by insurer but the broad process is as follows. First, the insured needs to file an advertisement in a daily newspaper about the loss of policy. The insured then needs to submit a copy of the newspaper with the advertisement along with an application for duplicate policy issuance, an indemnity bond, charges for preparation of a duplicate policy and stamp fees.

In some cases, insurers waive off the requirement of a newspaper advertisement, for instance, when loss is due to theft. In this case, a first information report (FIR) lodged may be required.

My uncle died about three years ago but we did not apply to the insurer for a claim. Can we do that now?

—Anando B.

You should immediately apply for the death benefit. Please submit documents, including death certificate and copies of the insurance policy. The insurer will ask the reason for the delay. Give them the reason, which could be administrative oversight or that the documents were untraced or that the family was in trauma

Friends, I hope you have a oversight on term plans that are provided by insurance companies.

Working with Emotional Attachment is Good for health

Workers who feel emotionally attached to and identify with their work have better psychological well-being, says a new study.

Efforts to increase affective organisational commitment (AOC) – the employee’s emotional attachment to, identification with, and involvement in the organisation – may lead to a happier, healthier workforce, and possibly contribute to reducing employee turnover, the study said.

Thomas Clausen from National Research Centre for the Working Environment in Copenhagen, Denmark, and colleagues looked at how AOC affected psychological well-being and other health-related outcomes in approximately 5,000 Danish eldercare workers, organised into 300 groups.

The results showed significantly higher well-being for employees in groups with higher AOC.

Groups with high AOC also had lower sickness absence rates and fewer sleep disturbances, as reported by workers.

The findings suggest that strategies aimed at enhancing employee’s emotional attachment to work might help to address the high rates of burnout and turnover among employees in healthcare and eldercare services.

The study appeared in the Journal of Occupational and Environmental Medicine.

RBI releases Framework for dealing with Domestic Systemically Important Banks (D-SIBs)

The Reserve Bank of India announced today the designation of State Bank of India and ICICI Bank Ltd. as Domestic Systemically Important Banks (D-SIBs).
The Reserve Bank had issued the Framework for dealing with Domestic Systemically Important Banks (D-SIBs) on July 22, 2014. The D-SIB Framework requires the Reserve Bank to disclose the names of banks designated as D-SIBs every year in August starting from August 2015. The Framework also requires that D-SIBs may be placed in four buckets depending upon their Systemic Importance Scores (SISs). Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it, as mentioned in the D-SIB Framework.
The D-SIB Framework specifies a two-step process of identification of D-SIBs. In the first step, the sample of banks to be assessed for systemic importance has to be decided. The selection of banks in the sample for computation of SIS is based on analysis of their size as a percentage of annual GDP.
Based on the methodology provided in the D-SIB Framework and data collected from banks as on March 31, 2015, the banks identified as D-SIBs and associated bucket structure are as under:

Bucket	Banks	Additional Common Equity Tier 1 requirement as a percentage of Risk Weighted Assets (RWAs)
5	-	1.0%
4	-	0.8%
3	State Bank of India	0.6%
2	-	0.4%
1	ICICI Bank	0.2%

The additional Common Equity Tier 1 (CET1) requirements applicable to D-SIBs will be applicable from April 1, 2016 in a phased manner and would become fully effective from April 1, 2019. The additional CET1 requirement will be in addition to the capital conservation buffer.
Further, as mentioned in the D-SIB Framework, in case a foreign bank having branch presence in India is a Global Systemically Important Bank (G-SIB), it has to maintain additional CET1 capital surcharge in India as applicable to it as a G-SIB, proportionate to its Risk Weighted Assets (RWAs) in India.

Sangeeta Das
Director

Press Release : 2015-2016/545
Information collected at RBI website.

Banking Services & Overview Of Area For Exam Preparation

Banking services

1. Assets, liabilities and working capital of a bank.
2. Demand liabilities vs time liabilities
3. Banker’s rights (lien). Know your customer (KYC) norms, Adhar Card enabled payment, Money laundering, Benami transactions
4. Types of Bank customers and provisions related to them:
   1. Minor-Guardian, partnership firms
   2. HUF and karta
   3. NRI, PIO
   4. joint account holders
   5. Married Women
   6. partnership firm accounts
   7. public/private companies
   8. trusts and cooperatives
5. Types of bank accounts and their features:
   1. current account, savings account
   2. term deposit account, fixed deposit,
   3. PPF, senior citizen’s account
   4. NRE-rupee account, FCNR account, RFC, EEFC, escrow account
   5. Allied topic: post office savings account and National savings certificate
6. Unclaimed/dormant accounts, RBI provision for them, Death of customer, insolvent customer, liquidation, Garnishee orders
7. Types of negotiable instruments: bank draft, bank check, promissory note, warehouse receipt, Treasury bills etc.
8. Cheque:
   1. order/bearer/travel/bankers cheque
   2. endorsement, cheque-crossing,
   3. post-dated cheque, what if cheque-date is invalid (31st Feb) or holiday (2nd Oct)?
   4. when Bank should not pay, cheque-dishonor (cheque-bouncing)
   5. MICR, Cheque truncation, new CTS-system
   6. Note refund rule, clan note-policy
9. demand drafts, telegraphic transfers, safe deposit lockers
10. ATM: PIN, HWAK, White Label ATM, third party ATM
11. Debit card, credit card, smart card
12. Mobile Banking, personal banking, tele-banking, corporate banking
13. Online banking:
    1. NEFT, RGTS, EFTS, Bankwire, E-commerce
    2. networking among banks: INDONET, BankNET, RBINET, SWIFT, Point of Sale (POS) terminal
    3. core-banking solutions
    4. Electronic signature and Information Technology Act
14. Loans
    1. different type of loan products,
    2. Subprime lending
    3. mortgage, reverse mortgage, collaterals, stamp duty on loan documents
    4. lien, set-off
    5. Priority sector lending: and its subsectors. How do they apply to Domestic bank vs Foreign bank?
15. bank guarantee, letters of credit
16. Banking Ombudman: powers functions, appeal structure and Consumer courts
17. Bancassurance, cross-selling, universal / narrow / retail banking

Fixed interest (or) Floating interest which is best?...

Since banks have the freedom to levy foreclosure on fixed rate loans, some banks offer loans only on fixed rates.

In the recent past, bank borrowers were lured by advertisements offering low fixed rate of interest on loans for periods as high as 20 years.

While customers can opt for fixed or floating rates for home loans, several new generation banks now offer only fixed rates for car loans, personal loans, gold and other loans meant for individuals.

Apart from the rate per se, an individual should know the difference between a fixed rate and floating rate loan system in banks to take informed decisions while availing loans.

By definition, a fixed rate loan implies the interest rate is fixed during the tenure of the loan (sometimes, fixed rates on long term loans are reset at regular intervals, say once in 5 years). Like interest on fixed deposits, the subsequent changes in the interest rate structure may not affect the pricing of these loans.

On the other hand, floating rates “floats” with the market and get adjusted with the changes in the base rates of individual banks.  Generally, in the present economic scenario where interest rates are expected to fall, it is desirable to opt for floating rate loans.

Regulations: One has to understand why the banks, especially new gen banks, pushes the customers to avail fixed rate loans or even offer many loan products to individuals only on fixed rates.

In June, 2012, RBI directed banks not to levy foreclosure charges/prepayment penalties on home loans on floating interest rate basis. Similarly, from May 2014, in the interest of the consumers, banks are not permitted to charge foreclosure/ pre-payment penalties on all floating rate term loans sanctioned to individual borrowers.

Thus, these directions do not withdraw the freedom of banks in levying foreclosure/prepayments’ penalties on fixed rate loans.

Practices: Since the freedom to levy foreclosure/prepayment charges is available to banks on fixed rate loans, some banks offer loans to individuals only on fixed rates.

At the time of availing a loan, an individual cannot predict his future income during the loan period. These banks expect the loan to be repaid only on the terms stipulated at the time of sanction and deviations, if any, are charged heavily.

It is true that bank incurs a lot of expenses, especially manpower, in pitching the loan products and the processing fees levied may not be sufficient to recover these expenses. Banks expect to earn interest on these loans and for that purpose loans have to continue in the books.

One should know how this freedom is put in practice to the advantage of the banks and, certainly at the cost of innocent borrowers. Practices differ from bank to bank. Banks are expected to charge interest on the daily outstanding balances.

Stipulating a specific date for paying the EMIs and not apportioning the repayments received prior to these dates’ results in interest loss to the borrowers.

Surplus funds
A borrower may have surplus funds with him and bank will not permit him to repay the installments in advance; nor will the bank accept lump sum repayment.

Sometimes, additional interest is charged on the prepayments. Some banks also restrict the number of prepayments during the tenure of the loan.

In the case of gold loans where bullet payments are stipulated, part payments/foreclosure is permitted only after expiry of specific period from the date of loan availment.

Therefore, the borrowers are compelled to park their surplus funds in their savings account earning much lesser interest than they pay on the amount they borrow. At the same time, any delay in repayment is charged heavily by the banks.

Look at the practices for foreclosure! Not permitting the foreclosure during initial stipulated period (say 6 months), charging heavy amount computed as a percentage on the principal amount outstanding (higher the loan period remaining, higher is the rate), levying the interest for the remaining period, stipulating a minimum amount etc cost the borrowers  very heavily.

For home loans, switch from floating to fixed or fixed to floating is permitted at a charge computed as a percentage on the amount outstanding, subject to a minimum absolute amount.

An individual borrower should understand that availing a loan at fixed rates restricts his freedom of servicing the loans and any deviations from the repayment schedule will add to his cost. 

A prudent borrower should not be guided by the rate alone. He has to keep the freedom of prepayment/ foreclosure (without loss) with him. And, certainly, he has to prefer floating rates to fixed rates.

In a country like India, RBI has to consider the interest of innocent consumers. RBI has to balance the consumer protection with the freedom to individual banks and consider issuing regulatory guidelines on levy of prepayment/ foreclosure penalties on fixed rate loans also, directs banks to provide both fixed and floating rates on loan products to individuals.

Too much freedom to individual banks in levying charges results in exploitation of ill-informed consumers.

One can hope for some action from RBI in this direction in the days to come.
(The writer is a retired public sector bank executive teaches banking in ICICI Manipal Academy (IMA), Bengaluru) Mr.K.N.V. Prabhu